Comic-Con is pretty profitable, for a non-profit

Denis Poroy/Invision/AP

Bersain Gutierrez, dressed as Superman, poses in front of the convention center before Preview Night at Comic-Con International held at the San Diego Convention Center Wednesday July 20, 2016, in San Diego.

Bersain Gutierrez, dressed as Superman, poses in front of the convention center before Preview Night at Comic-Con International held at the San Diego Convention Center Wednesday July 20, 2016, in San Diego. (Denis Poroy/Invision/AP)

Millions of dollars will change hands at ticket booths and in exhibit halls when Comic-Con opens Thursday inside the San Diego Convention Center, and the group’s proceeds will be tax free.

According to the Internal Revenue Service, the four-day festival of comics, film and entertainment of every stripe is a nonprofit educational organization, and exempt from paying taxes.

Comic-Con, which is expected to attract more than 130,000 fans from around the globe, is estimated to pump $135 million into the local economy. The host organization receives a fraction of that in ticket sales, rent from vendors, advertising and sponsorship.

2016 schedule

Revenue to Comic-Con totaled $17.3 million in the 12 months ending Aug. 31, 2014, the most recent year for which information is available. With $13.9 million in expenses, that put the group $3.4 million in the black, for a new total in unrestricted cash of $20 million.

Organizers say the money they collect supports an awareness campaign that extends beyond the exhibit halls. They say the event is more than a promotions bonanza for comics, computer games and Hollywood talent.

“We have a mission to bring comics and related popular art to a wider audience,” spokesman David Glanzer said in a statement. “So while people see images in the media of many attendees dressed in costume, or big booths on the exhibit floor, there are also two floors of meeting space that are used for panels, workshops and programs that highlight areas of art that the public may not be generally aware.”

Excess revenue earned by the nonprofit is reserved for the future, Glanzer added.

“Funds left over from the preceding year are used as operating funds for next year’s events,” the statement said. “If there is a problem that prevents the show from occurring, these funds allow us to meet our financial obligations and to continue operations.”

He noted that the group’s historical, academic and cultural efforts may eventually be anchored at a museum in Balboa Park.

Regina Birdsell of the Center for Nonprofit Management in Los Angeles said it is important for charities to collect more in revenue than they spend each year, and for them to maintain a reserve in case of fiscal emergency.

But they also need to constantly evaluate whether they are meeting their obligation as a public-benefit corporation, she said.

“‘Profitable’ nonprofits are allowed to some degree,” Birdsell said. “As they have evolved, they do need to revisit if they serve a public purpose as a tax-exempt organization.”

Comic-Con started 46 years ago as a humble gathering of 100 comic-book fans in the basement of the U.S. Grant Hotel. It has since evolved into one of the premier pop culture extravaganzas in the world.

Fans turn up by the thousands dressed as their favorite characters from television, movies and video games. Actors and writers turn out to promote their latest projects and generate buzz for upcoming work. Marketers rack up sales of T-shirts and other memorabilia.

The convention has become such a local asset that organizers receive concessions in rent and other subsidies in order to remain in San Diego.

Despite its eight-figure revenue, the San Diego Comic Convention — the group’s name on federal documents — reports relatively modest salaries for top employees.

According to federal tax filings, Executive Director Dona Fae Desmond was paid $132,632 in 2014. Glanzer was the second-highest paid employee at $110,657. Board President John Rogers collected $64,488 and four other board members were paid between $15,000 and $40,000 each.

The charity reported that most of its 2014 revenue came from “memberships” — about $10 million in ticket sales. It also reported $5 million in trade show income, almost $2 million from sponsors and about $600,000 in advertising.

The biggest expenses — after $2.1 million in payroll for 43 employees — were $1.8 million for private security, $1 million for equipment rental, $1 million for temporary labor and $663,000 for transportation.

Comic-Con also reported spending $562,000 on sponsorships, $244,000 on bank fees, $127,000 on hospitality, $73,000 on parking and $56,000 on guest rooms. It also spent $390,000 on rooms and meals for employees.

“These are typical nonprofit costs,” Glanzer wrote in his statement.

Tax returns filed by public-benefit charities are required to be made public as part of the trade-off for not paying federal taxes, which can be as high as 35 percent for businesses. The group’s tax filing reports $0 on the line item where grants or scholarships are reported.

State law also requires charities with more than $2 million in annual revenue to produce independent audits every year — and to make those reports available to members of the public who ask.

Birdsell said charity officials do not always appreciate the responsibility that comes with tax-exempt status.

“Sometimes when they get profitable, they don’t want the transparency required of nonprofits, where information is very public,” she said.

Tom Schulte, a certified public accountant and nonprofit consultant based in Los Angeles, said Comic-Con is unusual among most charitable organizations because of its healthy reserves and lack of reliance on donations from the public.

Schulte said he hopes Comic-Con puts its millions to wider use throughout the year.

“The jury is still out,” he said. “It still has time to turn this into a positive for the community. They could create scholarships to animation school. There’s lot of stuff they have the money to do. But I give them the benefit of the doubt and say the best is yet to come.”

The board is thinking about setting up a permanent exhibit to fulfill its mission of “creating awareness of, and appreciation for, comics and related popular art forms,” the statement from Glanzer said.

“Recently it was made public that Comic-Con is considering the viability of a Comic-Con Museum to help maintain a Comic-Con legacy,” he wrote.

Comic-Con has been in talks with the Hall of Champions at Balboa Park to occupy space there, and a museum in that location would put the comics group shoulder to shoulder with a host of nonprofit groups.

Even short of that, Glanzer said, “We provide a great deal of opportunities at the show for individuals to learn about artistic forms of expression. These opportunities can and have included panels on historic aspects of art, presentations and inclusion in academic papers and presentations and workshops for educators and those who work with individuals on different aspects of learning.”